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Solving the revenue planning tug of war

No matter what kind of changes await you this year, a proper revenue plan will better position you to deal with all of them.

If you’re a chief revenue officer (CRO), I don’t have to guess what you’re busy doing these days. For most organizations, it’s time to work up your revenue plan for the coming year. You want it accurate, built more on facts than assumptions, and designed to minimize risk while maximizing opportunities.

But you also want it flexible enough to accommodate the twists and turns of your business. Because there will be twists and turns.

No matter what kind of changes await you this year, a proper revenue plan will better position you to deal with all of them. Revenue is the oxygen of your business. You can’t survive, let alone thrive, without it. And the success of virtually all other plans—your corporate financial plan, workforce plan, cash and expense plan, operational plan—depends on your ability to attract as much of that oxygen as possible.

Top-down vs. bottom-up

In most organizations, the revenue plan is driven by the sales plan. Granted, you may glean some revenue from non-sales income sources, such as leases, investment gains, and more. The sales plan, though, really defines the revenue plan for most of us.

There’s a historical challenge with sales plans, however, and it has to do with where they originate. Most sales plans are built either top-down or bottom-up, and each approach comes with pros and cons.

Top-down plans are almost automatically aligned with your corporate strategy from the start, because in a real sense they flow from that strategy. That’s a strength. They also tend to be a bit more stretchy, a bit more aggressive, than bottom-up plans. So if your organization has aggressive growth goals, you’re likely to see aggressive revenue targets from a top-down plan. Sometimes, though, they can be unrealistic, out of touch, and misaligned with base cost assumptions, which is always a risk with any top-down approach. If your team feels top-down goals are so aggressive they’re unattainable, you may find yourself with a morale problem.

The opposite can be true with bottom-up plans, which emerge from sales managers and are usually based on what your team achieved last year, how many people you have today, and current quota and activity levels. While they’re great in that they adhere to the reality of what’s happening in the field—as every plan should—bottom-up plans often are too safe, too conservative to meet corporate revenue goals. Considering how these plans originate, the desire to stick closely to the status quo is hardly a mystery. But it can lead to missed opportunities and leave revenue on the table. Another difference: Bottom-up plans tend to arrive with full buy-in from the field; top-down plans, not so much.

To bridge the gap, modernize how you plan

Marrying these two disconnected types of plans isn’t impossible. But you should do it. These days, however, it requires something other than spreadsheets. Today’s organizations have too many moving parts and must respond too quickly to trap their sales or revenue plans inside a spreadsheet. Yes, I know, we used them for decades. But sales planning today requires a sophisticated balancing act of setting the right quotas, balancing territories, and optimizing capacity—all achieving the top-line revenue goal. You need real-world data to build what-if scenarios around ramping, staffing, and attainment. And you need those scenarios based on what’s happening right now in the field.

And before it’s all done, you have to make sure that your entire sales plan aligns with the corporate financial plan and the strategic goals it’s based on. Are your expenses aligned with corporate’s targets? Are targets high enough to meet revenue targets but not so high as to run off productive salespeople? Is your plan in a format you can easily adjust to respond to those inevitable twists and turns and make the course corrections that will keep you competitive? Or is it locked away in a spreadsheet, without the benefit of analytics driven by a flexible, model-anything engine?

Not too long ago, I was forced to create sales and revenue plans on spreadsheets. Automatic updates and rolling forecasts weren’t just difficult—they were out of the question. Fortunately for us (and for any organization, of any size), those days of static planning are over. Modern, cloud planning solutions offer a way to balance the needs and reality of the field with the revenue and corporate goals of the business—and to finally solve the top-down vs. bottom-up tug of war.

Fred Gewant is the leader of Adaptive Insights’ worldwide field organization, including sales, channels, customer success, and professional services. Leveraging deep software and services expertise, Fred’s focus as chief revenue officer is delivering value to customers, from implementation throughout their customer journey.

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